Economist's Commentary: August 26, 2008

Quick Take on the Economy: August 26, 2008

By Lawrence Yun, NAR Chief Economist

New home sales scratched out a gain of 2.4 percent in July. The latest sales figure of 515,000 is 35 percent below a year ago and far below the 1.2 million sales set in 2005.
The median transacted price was $230,100, 6.3 percent below a year ago. There is very little pricing power with the very high overall inventory of homes - both new and existing - on the market.
Because of the continuing cutback in production by builders, the total new homes for sale have been trending down for the past two years. Inventory fell to 416,000 in the latest month, much lower than 537,000 in 2006 and getting close to "normal" inventory levels. The months supply, however, reamins high at 10.1 months because of soft sales activity.

OFHEO reported its latest price trend and showed no change in home prices from May to June. However, because of declines in the earlier months, home prices are down 4.8 percent from one year ago nationally. OFHEO primarily covers mortgages that are prime loans.
Prices rose respectably by better than 3 percent over a one year time period in 12 states with Oklahoma and Wyoming leading the way.
Prices fell by double-digits in 3 states: Florida, Nevada, and California. Arizona prices fell 9 percent. The price changes for the remaining 46 states have been less the 5 percent either up or down.

The Case-Shiller price index, which captures many of the home sales with subprime loans, fell big time. The latest price decline of 15.9 percent, which covers up to June (not July as was reported for existing and new home price), was the largest on record.
Home prices fell by more than 20 percent from a year ago in markets in California, Florida, and Arizona.
Home prices rose in 9 of the 20 markets in terms of month-to-month change. Dallas, Denver, and Boston have shown gains for few straight months. For example, a home buyer in Denver in who bought in March would now enjoy better than a 3 percent price gain in three short months.

Housing data are moving all over the map, with some good news and some continuing bad news. The fluctuating data generally signal early stages of recovery.
It is worth reinforcing the notion that all real estate is local because there are so many market variations.
Home prices are generally holding much better in neighborhoods with prime loans while price trends are weaker in neighborhoods exposed to large subprime loans.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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